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- GDP (PPP):
- $551.8 billion
- 4.1% growth
- 3.3% 5-year compound annual growth
- $14,259 per capita
- Inflation (CPI):
- FDI Inflow:
Algeria’s burdensome business environment and overdependence on its energy sector continue to undermine prospects for sustained economic development. With structural reforms to diversify the economic base achieving only marginal progress, policies to enhance regulatory efficiency and maintain open markets for the development of a more dynamic private sector have not advanced.
Economic Freedom Snapshot
- 2016 Economic Freedom Score: 50.1 (up 1.2 points)
- Economic Freedom Status: Mostly Unfree
- Global Ranking: 154th
- Regional Ranking: 13th in the Middle East/North Africa Region
- Notable Successes: Fiscal Freedom and Monetary Freedom
- Concerns: Regulatory Inefficiency, Rule of Law, and Investment Freedom
- Overall Score Change Since 2012: –0.9
Rule of law remains fragile in Algeria due to corruption and an inefficient judicial system that is vulnerable to political interference. Lingering political uncertainty and a negative attitude toward foreign investment hamper fuller integration into the world economy, and policies to promote or sustain reforms have been neglected or even reversed.
President Abdelaziz Bouteflika won a fourth term in April 2014 despite rarely appearing in public after a 2013 stroke. Reforms introduced after the Arab Spring protests swept Tunisia and Libya included an end to almost two decades of state-of-emergency restrictions on civil liberties. The socialist model adopted after independence from France in 1962 has hindered development, and the state still dominates the economy. Formal-sector unemployment and housing shortages are persistently high. Algeria has the world’s 10th-largest reserves of natural gas and is the world’s sixth-largest gas exporter.
In 2015, the government clamped down on political opponents, fueling resentment and further weakening the state’s credibility. The judicial system is generally weak, slow, and opaque. High levels of corruption plague the business and public sectors, especially the energy sector. An estimated one-half of all economic transactions in Algeria occur in the informal sector. Most real property is in government hands.
The top income tax rate is 35 percent, and the top corporate tax rate is 23 percent. Other major taxes include a value-added tax. The overall tax burden equals 12.2 percent of total domestic income. Following two years of significant spending, the government has undertaken fiscal consolidation since 2013. Public debt equals slightly less than 10 percent of the size of the economy, and government spending amounts to 38 percent of GDP.
Despite some enhancement of the business environment, significant bureaucratic impediments to entrepreneurial activity and economic development persist. The labor market remains rigid, contributing to high youth unemployment. Despite falling global oil prices, the government refused to reduce costly subsidies for basic foods, fuels, electricity, and housing, increasing fiscal pressures and distorting the economy.
Algeria’s average tariff rate is 12.1 percent, and its trade and investment policies are less open than the global average. Screening of foreign investment has been reduced, but foreign investors are generally limited to minority status. Capital markets are underdeveloped; the number of private banks has grown, but the financial sector remains dominated by public banks.